Civil Code Section 1717: Court of Appeal Reverses Fee Award Given That Neither Side Prevailed Under The Contract

Fifth District Overturns Based on a Pragmatic Assessment of Litigation Results.

     Who says that appellate courts are not pragmatic in their assessment of who prevailed for purposes of awarding attorney’s fees? That is the law after all, and the next case is an illustration of where a cause was reversed because neither side prevailed under the contract.

     Boland v. Baker, Case No. F054226 (5^th Dist. May 7, 2009) (unpublished) concerned litigation over a right of first refusal to buy adjoining property in which the trial court eventually concluded no side was entitled to damages or specific performance, because one side failed to candidly provide all the terms of the outside purchase offer so that the holder of the refusal right knew what do to initially (but was not really interested in exercising its refusal right given the pricey nature of the outside offer). Given these equities, it is no surprise that the lower court did what it did. However, the trial court did award the refusal right holders attorney’s fees and costs as prevailing parties under the purchase agreement fees clause.

     The Fifth District reversed the fees/cost award.

     In a 3-0 opinion authored by Justice Hill, the appellate court determined that the defendants were entitled to costs because neither side obtained relief and defendants were the prevailing parties under Code of Civil Procedure section 1032 (the routine costs statute). However, the matter was quite different with respect to the fees award—the lower court failed to apply Hsu v. Abbara, 9 Cal.4^th 863, 876 (1995) [one of our Leading Cases] for purposes of determining whether either side had obtained his/her litigation objectives by comparing the relief requested in the case. Although remanding the matter for a new prevailing party determination, it does appear that Justice Hill and his colleagues had grave doubts that anyone prevailed, a pragmatic determination given that no one obtained relief under the lower court’s decision.

     The fee victor in the lower court also claimed that defendants could not challenge the fees award because they did not separately appeal the postjudgment order. Not so, said the appellate panel. Because the underlying judgment had awarded fees (although leaving the fixing of the amount for later), an appeal of the judgment was found to subsume the postjudgment fee order. (R.P. Richards, Inc. v. Chartered Construction Corp., 83 Cal.App.4^th 146, 158 (2000).)